The still booming economy recorded unexpectedly mighty growth of 5.2 percent year-on-year in the third quarter of this year. However, the first indicators paint a rather mixed picture for many states ahead of the holidays.
According to a Stateline analysis of preliminary federal economic data, the preliminary unemployment rate rose in 38 states in October and economic output slowed in 32 states. But states where economies are still humming — like Arizona, Florida, North Carolina, Texas and Virginia — have added hundreds of thousands of jobs since 2020, helping to keep national manufacturing mighty.
Economists point out that the enhance in the unemployment rate may be due to long-inactive workers looking for work; these job seekers are included in the unemployment rate.
We do not fall from the top step of a staircase, but only from the first step.
– EJ Antoni, financial scientist at the Heritage Foundation
Most economists surveyed by Stateline said states with high unemployment rates and failing manufacturing suffered growing pains in recovering from the pandemic. A slight slowdown could even be a good thing if it cools interest rates and inflation, they said.
“We are not falling off the top of a staircase, just the first one,” said EJ Antoni, an economist at the conservative Heritage Foundation. Unemployment will inevitably rise as more workers thrown out of work by the pandemic look for work, he added.
“One of the reasons for the low unemployment rate is that there are about 5 million people missing from the labor market,” Antoni said. “The labor market has never returned to its pre-pandemic trend.”
The labor force has shrunk in 19 states since 2020, with declines particularly dramatic in California, Maryland, New York, Ohio and Massachusetts, according to the Bureau of Labor Statistics. At the same time, manufacturing employment, often used as an indicator of economic health, fell in October because some auto workers went on strike.
Tax revenues of states
A slowdown in the economy could mean bad news for countries that have been suffering from falling tax revenues for more than a year. Many parliaments lower taxes this year in response to tough tax revenue growth in fiscal years 2021 and 2022; those lawmakers may now have to cut their spending plans due to rosier forecasts.
California, for example, had to cut its spending by $8 billion, this year’s budget and delay other programs to cover a $32 billion deficit; Maryland recently announced comprehensive transport Budget cuts due to rising deficits.
Meanwhile, the still booming states are reacting differently: Virginia began on up-to-date tax cuts combined with major spending in September as part of a bipartisan budget compromise. In November proposed spending $2.7 billion in additional tax revenue on border security and education.
At the national level, government tax revenues have been failing for 14 consecutive months, falling by 5.6 percent in September compared to the previous year, according to Data compiled by the left-leaning Urban-Brookings Tax Policy Center. The early October reports show “continued weakness” for most states, although a recent turnaround in the stock market could assist states for the rest of the year, said Lucy Dadayan, senior research associate at the center.
“The stock market has recovered somewhat in October and November and this could improve income tax revenues,” Dadayan wrote in an email. “A lot depends on the stock market performance in December.”
However, Dadayan also pointed to other signs that point to problems for states’ economies and tax revenues: the rise in home prices is slowing, corporate profits are falling and there are fewer public offerings that drive up stock prices.
In October, California’s unemployment rate was 4.8%, compared to 4.1% in October 2022. That’s the third-highest rate in the country, with only Nevada and the District of Columbia higher.
Chas Alamo, a fiscal and policy analyst at the California Legislative Analyst’s Office, called rising unemployment in California a warning sign for other states.
“There were 26 states with significant changes, and all of them saw an increase in the unemployment rate – not a single decrease. That struck me as a clear signal,” Alamo said in an email.
California’s unemployment rate has risen by at least half a percentage point year-on-year for eight consecutive months. Similar peaks were also seen in New Jersey (also eight consecutive months) and the District of Columbia (nine months) through October.
Despite New Jersey’s higher unemployment rate, “there are still more job openings than unemployed New Jerseyans,” said state Labor Department spokeswoman Angela Delli Santi. More people looking for work is a sign of optimism, she said, and more people are returning to the state’s job market.
At the national level, the number of people neither working nor looking for work is still about 4.8 million higher than at the beginning of 2020, according to Federal data.
In fifteen states, including California, Illinois and New York, there are fewer jobs than at the beginning of 2020.
GDP figures by state
New from state to state Estimates First-half gross domestic product data released on December 5 was good news for some states — California’s economy, for example, continued to grow despite recession fears. And Georgia, Hawaii, Massachusetts, New Hampshire, New Jersey, New Mexico, Ohio and West Virginia recovered from first-quarter losses to post second-quarter gains. Only Delaware, Mississippi and Wisconsin suffered inflation-adjusted GDP declines through June of this year.
However, state economic indexes maintained by the Federal Reserve Bank of Philadelphia showed that 32 states are expected to report lower economic output in October than in September, although these figures could change as the data are revised. (In October 2022, for example, the Output data showed a decline in 27 states, but after two revisions, only 12 states showed a decline that month, according to the Stateline analysis.)
Many of the nation’s largest states are not among the 32 states where GDP is expected to have declined in October. California, Florida, Georgia, North Carolina, Pennsylvania and Texas all grew in October.
However, Arizona, Illinois, Massachusetts, Michigan, New Jersey, New York, Ohio and Virginia were among the states where the economy shrank.
The economy of individual countries can be significantly influenced by local industry.
In California Status report An October report co-authored by Alamo said the state experienced a “mild recession” from the last quarter of 2022 to the first quarter of 2023, noting that there is no formal definition of a recession at the state level. The report cited a decline in technology investment, fewer home sales and regional bank failures as factors.
“The slowdown shows how important the technology and housing industries are to the vitality of the state’s economy,” the report concluded.
Washington state, another tech hub with giants like Microsoft and Amazon, has fared better than California, recovering jobs lost to the pandemic more quickly and recording lower unemployment this year. Washington’s unemployment rate is 3.8%, down from 4.6% in October 2022.
Washington state’s rural areas recovered faster than Seattle, said Anneliese Vance-Sherman, the state’s chief labor economist. Those communities have more industries deemed “essential,” such as health care and agriculture, while Seattle suffered more layoffs in the technology sector and declines in businesses that rely on commuters, such as restaurants.
A slight enhance in unemployment in Washington state in recent months could be a well development if it means some workers are returning to the job market, Vance-Sherman said.
“In Washington state, the recent increase in the unemployment rate is not due to job losses, but to new people entering or re-entering the labor market,” she said.
